Milwaukee County taxpayers may be stuck with $8 million bill from transit snafu

Taxpayers could pay big if county can't get out of paratransit contracts

Taxpayers are likely stuck paying more than $8 million too much over the next three years for paratransit services under two emergency contract extensions.

As the Journal Sentinel reported last week, Milwaukee Transport Services signed the contracts in October on behalf of the Milwaukee County Transit System after bad planning, legal challenges over a botched signature and a tight timeline made it impossible to accept a "best value" bid that was $8.4 million cheaper than the emergency extensions.

Angry about the lost savings, county officials are exploring whether they can get out of the contracts. But while the potential savings are obvious, ways to get them are not.

The most expensive three-year emergency contract pays Transit Express $24.7 million to serve the north side. That's $2.2 million to $4.5 million more than what other bidders had offered to do the job, bid documents show.

But the contract can only be canceled for three reasons, according to a copy of the contract obtained by the Journal Sentinel: If Transit Express defaults, if it fails to fulfill its contract obligations, or if the Federal Transit Administration cuts or eliminates funding for rides for Milwaukee County residents with disabilities.

The funding cut caveat was not part of the company's last regular contract, which could be canceled "for convenience."

The other three-year emergency contract pays more than $15.5 million to First Transit for serving the south side. That contract, too, can be canceled through default or failure to perform. But it may also be canceled "for convenience" if the county pays $150,000 in damages.

The question is whether the previous bidders would still offer to do that job on the south side at the same rate or whether the county can get a cheaper bid if it requests new proposals.

John Doherty, vice president of Transit Express, doesn't think so. "There's no way it would be in the best interest of the county to get a new bid," he said. "They're not going to get a lower rate than that."

Two bids would be cheaper over the next two years compared to what First Transit is getting paid: City Wide Transit and American United Taxicab. That's assuming the two companies would still be willing and able to do the work at the rate they bid.

The emergency extensions have different conditions because they were negotiated separately with the two vendors, said Jackie Janz, a spokeswoman for MCTS.

County officials are exploring options for what to do from here. In an email to Milwaukee Transport Services' top manager, Lloyd Grant Jr., last week, Milwaukee County Supervisor Deanna Alexander asked whether First Transit might carry insurance that would cover the mistake of its president, Bradley Thomas, who set off the entire snafu by erroneously signing a required form incorrectly. She has also suggested exploring whether the emergency contracts could be canceled if the county decides to cut its contract with Milwaukee Transport Services.

Realistically, a new bid process and start-up time could take until the fall. That would bring the savings down to two years' worth of service.

Assuming the bids would come in the same, savings by having another provider take over the north side for two years could range from $1.6 to $3 million, according to a Journal Sentinel analysis. For the south side, savings could be between $653,000 and $2 million over two years.

But that's all presuming the county could cancel the contracts.

Brendan Conway, a spokesman for county executive Chris Abele, said "all options" are on the table.

"We're looking to leave no stone unturned if there's a way to provide this service but in the most cost-effective manner," he said. "In the end, that may end up being what's in the emergency contracts, but it may not."

The state cut $6.8 million out of Milwaukee County's transit budget in 2012 and the same in 2013, Conway said. Federal funding was reduced by $1.5 million from 2012 to 2013.

To make up for the cut, the county secured a federal grant for $19.1 million over two years and backfilled with a county tax levy worth $1.5 million in 2012, he said.

In her email to Grant, Alexander noted that state law prohibits the County Board from raising taxes more than about $4 million per year.

"This means that even if we wanted to ignore every other department and cause in the entire county next year, this 'contracting error' is more than double the amount we could potentially give to MCTS to deal with such an issue," she wrote. "And on that note, I can assure you that I have no intention of going to the taxpayers to ask for (more than $8 million) to fix such an error."